Jim’s Quote of the Day:

“The first information survival skill we all need is the ability to decode propaganda and demythologize the highly commercialized and entertainment-based U.S. culture. Psychologists politely call it ‘resistance to enculturation.’ Writer Ernest Hemingway had a less elegant term: ‘cr*p detecting.'” – Karl Albrecht, article in Training and Development magazine, February 2001.

Hedge Fund Redemption Suspensions–Tax Bills are Adding Insult to Injury

You’ve probably read about the seven Hedge Funds controlling $5.4 Billion have been forced to liquidate or suspend redemptions in the past month. Many of their investors had been leaving their full principal intact, quarter after quarter. In many many cases they want to continue to “let it all roll”, so they then used other funds to pay the tax bills on their hedge fund earnings. But now, with redemptions (cash outs) halted, not only will they lose most or all of their principal, but they must also pay the 2007 income tax on the “gain” for the calendar year. What a bitter irony.

I know one couple that has 2/3s of their net worth tied up in very well-known and long-established a hedge fund. Despite the dramatic and unprecedented collapse of the global credit market, this couple is in denial that the value of their fund could ever decline. Despite my repeated urgings, they have now missed their opportunities to cash out, though two quarterly redemption windows.

Back in September and October of 2007, I warned specifically about the ability of hedge fund managers to suspend redemptions without notice. This is now exactly what is happening, on a grand scale. I often say that markets are alternately driven by greed and fear. Now, the fear index is clearly rising. But many of the investors that still stubbornly hang on to their greed-driven investments are about to pay the piper. And then some extra tax, on top of that.

Five Letters Re: Battle Rifle Recommendations for a Californian

Mr. Rawles:
One way that U.S. citizens can still get M1 Garand rifles at reasonable prices is via the DoD‘s Civilian Marksmanship Program (CMP).

M1 Garands are available starting at $445 + shipping. (I believe the Field Grades to be best choice for practical use rifles–$495)

M1 Carbines are available for $419 + shipping and up. [JWR Adds: I do not recommend M1 Carbines, because they are chambered for an anemic cartridge. The .30 US Carbine is not a reliable man stopper!]

.30-06 military surplus ammunition in clips, bandoleers and sealed cans, for $200 per case of 768 rounds.

Requirements: Proof of citizenship, proof of age, proof of membership in a CMP affiliated club, proof of participation in marksmanship training activity and NICS check. Rifles can be shipped right to your doorstep by the CMP.

Additionally, the Appleseed Program that you advertise on your site normally provides certificates for proof of marksmanship activity to Appleseed participants if requested. Membership in the RWVA (the Appleseed Program’s parent organization) satisfies the “affiliated club” requirement, and participation at an event exposes one to the techniques and tools needed for becoming a better rifle shooter. Appleseed has been to Corona, California, and will be in other locations.

For other options, the Lee-Enfield is probably the best bolt action battle rifle–the mag capacity, speed of loading with stripper clips, and rapid bolt manipulation minimize the usual bolt gun limitations. The No. 4 with the aperture sight is easiest to shoot well, especially with older eyes. Just get plenty of stripper clips, a decent sling that can be used as a shooting aid (USGI web sling–the one with the buckle and adjustment slide, not the “silent sling”), some spare parts (pins and springs mainly, Lee Enfields are pretty easy to repair), and maybe a Lee Loader in .303. The rimmed cartridge is easy to reload and can even be reloaded with black powder and cast lead bullets for really long term use.

Thanks for your web site, and God Bless. – SoM

 

Hi Jim,
I’m in California, and I absolutely feel the pressure your writer feels. I abide by the law, for fear of it. My choice for an MBR is the PTR-91.
I can get it in a “California Legal” configuration. It has what is called a “bullet button” installed. This is a replacement mechanism for the mag release, that requires an included tool to operate. Since California defines an assault weapon and a rifle with a detachable box magazine. [Under the California law], a fixed magazine is defined as one that requires a tool to remove. This arrangement works just fine. My rifle is a fixed magazine weapon, and therefore may have all the evil features I wish to install, without limit. No one can remove the magazine without the proper tool. And, it is not on the list of banned weapons. It’s not even close to that problematic AR-series and AK-series ban language (which no longer applies to off-list lowers. But that’s still something [that California] law enforcement has yet to learn.)

[To keep legal] you must never have the magazine detached from the rifle and still have the trigger assembly installed. Fortunately, the butt stock and trigger assembly fall into my hands. Make sure the mag stays in the rifle until the rest has been removed. It’s a pain, I know, but less so than an arrest. To make it easy for myself: I leave the mag in place, and load it through the ejection port. My mag has been pinned by the reseller so as to accept only 10 cartridges.

The PTR-91 can be found for $1,100 – $1,240, depending on options.[They comes with a] brand new H&K carrier, bolt head, and flash hider. – Randy in Central California

 

Hello Mr. Rawles.
I too, am a California resident. For the longest time I wanted to own an AR-15 only to be let down by the [California 1999] “Assault Weapons” ban.

Recently I found out I can indeed own a legal AR-15. In the text of the ban, there is a list of names that are forbidden. However, there are now several manufacturers making AR15s and their lower receivers are not on that list. These receivers are legal to own as they are not “listed”. Some people are calling said receivers “off list lowers” .

The California definition of an assault weapon lists the criteria as:
12276.1
(a) Notwithstanding Section 12276, “assault weapon” shall also mean any of the following:
(1) a semiautomatic, centerfire rifle that has the capacity to accept a detachable magazine and any one of the following:
(a) pistol grip that protrudes conspicuously beneath the action of the weapon.
(b) thumbhole stock.
(c) folding or telescoping stock
(d) grenade launcher or flare launcher.
(e) flash suppressor.
(f) forward pistol grip.

Since your typical MBR is going to be a centerfire, there’s no way to change that. However, you CAN change the “detachable magazine” or “pistol grip” feature.

There are two options if you want to remove the pistol grip. The U-15 stock, or the Monster Man Grip. This eliminates any question of the pistol grip and it’s “pistol style grasp”. This will allow you to have a detachable magazine. However, please understand that your rifle must be “featureless”. Adding D, E, or F will make it an assault weapon (seeing that it’s already 1) centerfire and 2) possessing the ability to have detachable magazines).

If you’d like to keep your pistol grip, there’s the option of “fixing” the magazine (meaning not detachable without the use of tools). One well known option is to weld your magazine to the receiver and feeding it via stripper clips. This can be an expensive, irreversible solution.

Instead, you can buy a magazine lock kit (known as a “bullet button”) that will convert from “detachable” to an “attachable” magazine rifle. This type of mag lock uses a tool (an allen wrench, a cartridge, a screwdriver, etc) to detach the magazine, but will accept the magazine without any complications. A list of various “bullet buttons” (and its cousins) can be found at ColdWarShooters.net.

Bullet Buttons are made for a variety of firearms, including AKs, AR-15s, HKs and from other sources, FALs. Should you choose this route, your magazine must be limited to 10 rounds as anything more will be illegal.

The best part about these options is that you are legally allowed to own what would otherwise be an “assault weapon”, and if you move to a gun-friendly state, they are 100% reversible.

Should you plan to build an California-legal AR-15 (or AK, HK, FAL, etc) then please refer to this PDF chart to ensure it is legal.

For more information about the above options, check out the CalGun Forums.

I hope this information is useful to law-abiding Californians. – Jason

 

Hi James:
I enjoyed reading SurvivalBlog this morning as usual. In reading your response to the question of a MBR for California, I thought I would chime in as we still have a number of fairly good options here in the PRK.

The M1A is the obvious choice, and while expensive, they can sometimes be had used for a very good price. Detachable mags, in California are sadly limited to 10 round mags, unless you actually owned those higher capacity mags prior to the 2000 PRK ban.

DSA makes several California compliant fixed 10 round mag FAL rifles which use stripper clips, and after market kits are available to convert a normally configured FALs to fixed mag/stripper clips configuration. There are probably thousands of FAL variants in California sitting in safes, which have had the pistol grip (and flash suppressor) removed to make them California compliant but shooting an FAL without the pistol grip is a bit awkward. MonsterMan Grips make a grip which makes off list lower AR-15 and AK types California compliant, and they have promised to make a similar grip for the FAL. I am planning on using an old thumb hole butt stock and filling in the thumb hole to make a close-to-normally configured FAL which will be California compliant, and will allow me to continue to use my 20 round FAL mags.

I went to a California gun show a few weeks ago – my first in many years, and was surprised at the plethora of California compliant ARs, AKs, FALs, and other weapons thought to be non-existent in the California market. I also saw a number of M1 Garands for less than your $900 market price. I thought I paid a lot for my 7.62 NATO Garand all those many years ago, never realizing what a deal it would really turn out to be. Keep up the great work, and sage advice.- Eric P.

Jim-
You mentioned the FN49 rifle as a possible MBR.
I just purchased a Yugo SKS ($199) plus four 20-round magazines (at $10 each) and 1,000 rounds (at $177) via the Internet. Even if I have the trigger re-worked, the springless firing pin replaced, custom stock installed, I’ll still be way under the least expensive FN49. In fact I could buy 2 SKS for the FN49 price. It’s a good rifle out to 300 yards and perhaps more if the rifleman has the skill set. In my suburban environment, it would be untypical for me to be shooting even out to 300 yards. So, does my SKS pass muster? – Bob

JWR Replies: Since they are chambered in an intermediate power cartridge with a rainbow trajectory, I consider the SKS a poor second choice to a full power rifle such as an M1A, M1 Garand, or FN49.. And though an SKS might suffice, but why risk your life depending on something that is second best? An FN49 combines great penetrating power with a flat trajectory, allowing effective defensive shooting out to 400 yards. With the exception of the Argentine Navy variant (with detachable magazines), the rate of fire for an FN49 is not as fast as an M1A, HK, or FAL, but it is close.

For those that don’t mind the paper trail associated with getting an M1 Garand through the CMP, read the eligibility requirements.

And for those that want to jump through the flame-filled hoops of a “complaint” semi-auto rifle in California, I agree with Eric P.’s advice on getting an FN-FAL or L1A1 and equipping it with a stripper clip top cover. These are quite fast to reload. Further, if anyone in California has owned a 20 round magazine since before Dec. 31, 1999 and they have resided continuously in California since before that date, then that magazine can be legally possesed, but not inserted in a semi-auto rifle that has any of the “evil” features.

With all that said, keep in mind that the legalistic contortions of California’s so-called “Assault weapons” ban skirt the real issue, which is freedom. If you love liberty, vote with your feet and get out of that Mickey Mouse state, post haste!

Jim’s Quote of the Day:

“The argument for liberty is not an argument against organization, which is one of the most powerful tools human reason can employ, but an argument against all exclusive, privileged, monopolistic organization, against the use of coercion to prevent others from doing better.” – Friedrich August von Hayek (1899-1992), Nobel Laureate of Economic Sciences 1974

Note from JWR:

The high bid in the current SurvivalBlog Benefit Auction lot is now at $210. This auction is for four items: a MURS Alert Base station, a MURS Alert Hand-held transceiver, an earbud, and a Kaito KA-1102 AM/FM/Shortwave. These radios were kindly donated by the owner of Affordable Shortwaves and MURS Radios. If you aren’t familiar with the Dakota Alert infrared perimeter security system, take a few minute to look at the Dakota Alert web site. These alarms are very reliable and versatile. I often recommend them to my consulting clients–especially those that plan to have lightly-manned retreats. You can easily set up multiple detector/transmitter sensors to provide 360 degree perimeter security for a large area. Instead of just a generic alarm, they will let you know which sensor was tripped, via a computer-generated voice message to a radio that you can carry on your belt. (Such as “Alert, Zone Two.”) The same radio can be used for point-to-point voice communications, on the little-used MURS band. The three radios have a retail value of $210. The auction ends on April 15th. Please e-mail us your bids, in $10 increments.

America’s Mountain of Debt: The Good, the Bad, and the Ugly

Collectively, Americans have accumulated a mountain of public and private debt in the past 20 years. The essential nature of all debts is that they someday must be repaid. Debts can be broken down into three categories:

The Good. This is debt with low fixed interest rates, secured by tangible assets that have value that exceeds the amount of the loan. Everything is copasetic as long as the borrowers have a steady cash flow and can make their payments

The Bad. This is debt that is either insufficiently secured, or that has a nasty contractual surprise waiting, such as an adjustable interest rate reset date, or a balloon payment date.

The Ugly. This is the call loan. It can be called at any time, for any reason.

An interesting thing happens when an economy heads into a deep recession. Credit tightens, and assets begin to lose value. The quality of debt drops. Employees get laid off in large numbers and installment credit delinquencies and then defaults soar. In very rough terms the following plays out:

Good Debt starts to resemble Bad Debt,
Bad Debt starts to resemble Ugly Debt, and
Ugly Debt becomes Hideously Ugly Debt.

Hedge fund managers are in some ways like high states poker players. The risks are large, but so are their potential rewards. Well-managed hedge funds make gobs of money in good economic times, when there are stable–or at least trend-predictable–interest rates. They apply leverage, often as much as a 30-to-1 ratio, to make their profits. They make most of their money by borrowing short but lending long. Again, this works fine in good economic times with stable interest rates. But when interest rates fluctuate wildly, hedge funds can run into trouble. Periods with an inverted yield curve can be the most perilous.

The collapse of the subprime mortgage bubble signaled an end to a decade of debt-driven good times. Almost overnight, liquidity dried up.

Now we are entering some very scary times. Bankers are getting margin calls. The only way that they can meet those call demands is to call in loans that they have made. So, at present, the bankers are making margin calls of their own: They are calling their loans made to hedge funds (among other borrowers). This is putting many hedge funds in an impossible situation. Many hedge funds will collapse.

There is an old saying on Wall Street: “A one million dollar debt keeps the borrower up at night, worrying. But a one hundred million dollar debt keeps the lender up at night, worrying.”

Exceptional times like these will result in some huge write-downs and write-offs. The only good news is that many assets will lose a lot of value. Everything from vintage cars to vintage wines, to grand estates will drop precipitously in price. Desperate for cash, the holders of those assets will be offering them at fire sale prices at the bottom of the market. If you are one of the few people with extra cash in your pocket, you will be able to pick up some tremendous bargains. (OBTW, the firm J.P. Morgan just did exactly that. They just inked a deal to buy troubled Bear Stearns for 2 cents on the dollar from its value of just one week ago.)

Letter Re: Galloping Bulk Food Prices

James,
Just a quick report on what I’ve learned about buying bulk grains and beans.
We have a local bulk food depot. I called to place an order. The guy checked with his wholesaler for prices, then called me back. He was aghast. He said everything was up around 25% since he had placed his last order two weeks ago. And up about 100% since the first of the year. The reason, the wholesaler reported, was demand from folks stocking up. The wholesaler was sold out of many items. Then I called an Amish bulk food store about an hour and a half away. Same story. (Yeah, I wondered about the Amish answering a telephone, too. Apparently the rules are flexible.)
Well, finding the prices a bit high, even for 50-pound bags (like 61 cents a pound for red wheat, 93 cents a pound for black beans, 53 cents a pound for white rice), I decided to check out the local “budget” supermarkets. Surprise, surprise. They were less expensive. Sometimes by a lot. For example, Sav-A-Lot had black beans for 70 cents a pound. ALDI had long grain white rice for 39 cents a pound. A further surprise, even Kroger’s beat the bulk food prices. Of course, these things may change when the supermarket’s wholesalers have to replace their stocks.
I’ sure things vary from region to region, even city to city. But, as always, caveat emptor. One shouldn’t assume that sources that should be cheaper actually are. And prices are unlikely to be any cheaper in our lifetimes than they are this afternoon. Best wishes, – Dr. Jack

Letter Re: Surplus Ambulances as BOVs

Mr. Rawles
I am a long time lurker on your site and would first like to thank you for all you do. I learn much from your site and finally read a topic I have some knowledge of. I operate a large ambulance service (75 units) and read the article about using ambulances as BOVs. I thought I might make a few observations.

It is true that the truck type ambulance have factory 4WD. However the majority of van type units have good aftermarket conversions. Most are done by Quimby. In fact I would only purchase a van type 4×4 from them. One down side to the truck type unit is that rescue squads are notorious for building a unit well above GVW. This causes all sorts of brake and suspension problems in the long term.

As for durability you may be surprised but the van type units have a longer service life as well as a lower cost of operation. They are usually lighter and have far more payload than the truck type. One big concern of a truck type ambulance is that the module is designed for remount. Now from a factory they are built well but at remount time all bets are off. They can truly be done by a shade tree mechanic and the electrical problems can be a nightmare. The van units will almost always come with the factory wiring and since they are all one unit the cabinets and structure seem to hold up better.

Excluding 4WD units, if I was getting one as a BOV, I would consider a van type Ford E350 built between 1990 and 1994 with the non-direct inject, non turbo engine. These units can easily go 400,000 plus miles. Consider keeping [one or more] glow plugs, a fuel pump, an extra set of injectors, and a crank position sensor as spare parts. These units are small, durable and easy-to-maneuver vehicles that handle well get acceptable mileage and are easy to obtain parts for.

One other thing to consider. How to paint the unit. In a true pre-TEOTWAWKI Get Out of Dodge situation having a vehicle that can appear similar to an emergency vehicle may not be a bad thing. With a van unit you could even have a magnetic sign with some sort of logo that could be added and removed at will. I can tell you an ambulance is rarely stopped or harassed. It is not unusual for them to go long distances and both LEOs and the public see out-of-area units all the time so it does not arouse a lot of suspicion. Of course you would have to check state and local laws.

Hope this gives some insight into ambulances. It is true they can often be found at low prices with low mileage and could make a great BOV, if selected carefully. – RB

Debate on Pending Legislation Reveals the Depth of Debasement of Our Currency and Coinage

The US House of Representatives is currently debating HR 5512, (the “Coin Modernization and Taxpayer Savings Act of 2008”) legislation that would further debase our coinage. According to a article in The Chicago Tribune titled Change for a Penny?, pennies will soon be made of steel instead of zinc. Although the bill leaves it up to the Treasury, presumably, five cent pieces would be made of zinc instead of their current alloy of copper and nickel. I’ve warned SurvivalBlog readers that this was coming, and that they should start saving nickels. Coincidentally, reader RBS sent us a link to an article about how Zimbabwe’s corrupt government is introducing a new 10 Million dollar bill. In Zimbabwe, all coins have long since been removed from circulation. The following is an excerpt of Congressman Ron Paul’s statement on this bill, speaking before the Financial Services Committee’s Subcommittee on Domestic and International Monetary Policy, Trade, and Technology. on March 11, 2008:

“Mr. Chairman, I oppose HR 5512 because it is unconstitutional to delegate the determination of the metal content of our coinage to the Secretary of the Treasury. Under Article I Section 8 of the Constitution, the Congress is given the power to coin money and regulate the value thereof. It is a shame that Congress has already unconstitutionally delegated its coinage authority to the Treasury Department, but that is no reason to further delegate our power and essentially abdicate Congressional oversight as the passing of HR 5512 would do.

Oversight by members of Congress, who have an incentive to listen to their constituents,ensures openness and transparency. This bill would eliminate that process and delegate it to unelected bureaucrats. The Secretary of the Treasury would be given sole discretion to alter the metal content of coins, or even to create non-metal coins. Given the history of Congressional delegation and subsequent lax oversight on issues as important as the conflict in Iraq, it would be naive to believe that Congress would exercise any more oversight over an issue as unimportant to most members as the composition of coins.

While I sympathize with the aim of Section 4 of this bill to save taxpayer dollars by minting steel pennies, it is disappointing that our currency has been so greatly devalued as to make this step necessary. At the time of the penny’s introduction, it actually had some purchasing power. Based on the price of gold, what one penny would have purchased in 1909requires 47 cents today. It is no wonder then that few people nowadays would stoop to pick up any coin smaller than a quarter.

Congress’ unconstitutional delegation of monetary policy to the Federal Reserve and its reluctance to exercise oversight in that arena have led to a massive devaluation of the dollar. If we fail to end this devaluation, we will undoubtedly hold future hearings as the metal value of our coins continues to outstrip the face value.

HR5512 is a sad commentary on how far we have fallen, not just since the days of the Founders, but only in the last 75 to 100 years. We could not maintain the gold standard nor the silver standard. We could not maintain the copper standard, and now we cannot even maintain the zinc standard. Paper money inevitably breeds inflation and destroys the value of the currency. That is the reason that this proposal is before us today.”

Jim’s Quote of the Day:

"We are now experiencing the first truly major crisis of financial globalization. Never before have banks seen such destruction of their balance sheets in such a short time. Moreover, there are signs that the problems are spreading. The risk premiums on commercial property, consumer credit and corporate loans have risen sharply." – Swiss central bank governor Philipp Hildebrand, quoted March 12, 2008

Note from JWR:

Congrats to Stephen H., the high bidder in our recent SurvivalBlog benefit auction. Today we are starting a new auction. This one is for three radios: MURS Alert Base station, a MURS Alert Hand-held transceiver, and a Kaito KA-1102 AM/FM/Shortwave. These radios were kindly donated by the owner of Affordable Shortwaves and MURS Radios. If you aren’t familiar with the Dakota Alert infrared perimeter security system, take a few minute to look at the Dakota Alert web site. These alarms are very reliable and versatile. I often recommend them to my consulting clients–especially those that plan to have lightly-manned retreats. You can easily set up multiple detector/transmitter sensors to provide 360 degree perimeter security for a large area. Instead of just a generic alarm, they will let you know which sensor was tripped, via a computer-generated voice message to a radio that you can carry on your belt. (Such as “Alert, Zone Two.”) The same radio can be used for point-to-point voice communications, on the little-used MURS band. The three radios have a retail value of $210. The opening bid for the combined lot of three radios is just $50. The auction ends on April 15th. Please e-mail us your bids, in $10 increments.

The Ides of March–The Dreaded Margin Calls Have Begun at Banks and Hedge Funds

This week the news wires were abuzz about the Bear Stearns bailout. It all started with a margin call.

An investment banking insider tipped me that there will be perhaps as many as five more “margin calls that can’t be answered” next week. Three names mentioned as possibly getting the dreaded call are Goldman Sachs on Tuesday and both Morgan Stanley and Lehman Brothers on Wednesday–on the same day that each reports their first quarter earnings. The word on the street is that all three may need to be bailed out, to varying degrees. Who is standing in the wings to bail some of them out? Credit Suisse and some other big European banks. At the end of next week there may be even more unanswerable margin call news, for US Bank and Washington Mutual. Oh yes, and rumor also has it that Wells Fargo sold some its tangible assets–including some that date back to the 1850s–in order to meet its margin call on Friday.

To meet these margin calls, most of the troubled banks will in turn be making margin calls of their own, to their hedge fund buddies.This, I believe, will cause dozens of hedge funds to go belly up, since most hedge funds have already been under redemption pressure from individual investors. Many hedge funds are using high leverage with their trading portfolios. This makes them unlikely to be able to meet their margin calls. The end result? Look at least for suspension redemption notices from a good portion of American and European hedge funds, and possibly bankruptcy announcements, soon after. A lot of investors are going to lose every penny.

And if all of the preceding weren’t bad enough, think about one other big piece of fallout: Derivatives. There are hundreds of billions of dollars of over the counter Credit Default Swaps (CDSes) in play, folks. Many of the banks and hedge funds are party to these CDSes. If a an institution goes belly up, then the full value of the CDS contracts on their books must be covered! Remember what I wrote a couple of months ago about Bank of America (BofA) bailing out Countrywide Financial? They didn’t do so because they were nice guys, or even because it was a “good investment.” They did so because that by acquiring Countrywide, they in effect became both party and counterparty to several large CDS derivatives. So magically, Poof! The derivative exposure disappeared. BofA simply “did the math” and realized that it would be less expensive to simply buy out Countrywide and zero out those derivatives, rather than having to fulfill them. Based on this recent experience, I predict that there will be dozens of mergers and acquisitions that come out of this banking and hedge fund crisis. We might even read of some acquisitions that will get us scratching our heads. Why would a major pension fund, an insurance company, or a money center bank buy a controlling interest in a hedge fund or an boutique bank? Watch for such oddities in the headlines in the months to come. You’ll know why…

You may ask, “What does all this high finance news mean to me? I don’t have any money in hedge funds or investment banks.” This bad news means that not only will there likely soon be some big bank runs, but also there will be The Mother of All Bailouts, in which the US taxpayers will foot the bill to bail out boutique investing banks, possibly a few big money center banks, and dozens of hedge funds. We are talking about hundreds of billions if not trillions of dollars that don’t exist. Read: monetization. So get ready for mass inflation of the US Dollar!

OBTW, I think Ben Bernanke needs to record a new greeting for his telephone voice mail [Insert imitated voice of the late actor John Houseman]: “Ben Bernanke isn’t here. He’s out making money the old fashioned way. He’s printing it!“

Letter Re: Wait and Buy Farm Ground Near the Bottom of the Market

James,
I wanted to address some of the discussion about buying [farm] ground. I know the situation may be different in the West since the flood of Californians may never result in lower prices than are currently available. But the following is my view of the current situation in the Midwest . Keep in mind that farmland has rarely acted in the same way as housing prices have. For one there is not the mass subsidization of farm land purchasing like housing. (think GI loans, first time buyers loans, Freddie Mac and Sallie Mae, etc)

The perils and pitfalls of land ownership is completely subjective depending on your region of the country and a host of other site or region specific issues. For instance, in the Midwest , good cropland away from metropolitan areas was selling for $2,000-$2,500 an acre in 2001 and 2002. It is now regularly being priced in the $6,000 area (it has roughly doubled) and between 10,000-$50,000 and acre the closer you get to a big city. It seems it has become fashionable for investors in New York and Los Angeles to buy cropland and take advantage of the ethanol boondoggle or the high crop prices. Even trash land that was good for nothing but hunting has soared upwards of $3,000 an acre (you couldn’t give it away for $300 an acre 15 years ago. It seems that everyone is trying to buy hunting ground to go into business as an outfitter or hunt deer. Many of these people live half way across the country (Mississippi, Colorado, Alaska , Pennsylvania, et cetera). It doesn’t help that every hunting magazine encourages this in the pitiful quest to shoot trophy deer (who got that way by eating corn and soybeans off of productive farmland all their life).

On its face you would think that the cost of land would do nothing but go up in price. I happen to remember the same thing around here during the 1970s and 1980s before the price of land collapsed. The commodities bull market of the 1970s encouraged every farmer and speculator to run out and purchase land. The run up started around $500 an acre to a top of around $4000-5000. Then the crop prices collapsed and farm land could be bought for $1,000-to-$1,500 an acre in the mid 1980s. If the current scenario turns out to be a similar multi-decade commodities boom that later collapses as the prices get ahead of themselves, the same scenario may present itself.

The nature of our semi-capitalist system tells us that there will be booms and busts in every market or sector. For many people it may make more sense to purchase a smaller piece of property first for a retreat and plan on buying more later when the inevitable collapse/stall in price happens. You may come across a once in a lifetime deal that throws this whole idea out the window. Many younger people feel like they have to go into debt and struggle to get all they need to “survive”. Your turn will come and at some point when you are more financially secure you may be able to buy a piece of property at a more reasonable price. Many of the people buying now are not even remotely attached to the land/locale and their interest will wane over time. Others will find their debt load too much to handle. At some point they might beg you take farm ground off their hands at a 50% loss to themselves. I know that at least two plots of my in-laws farms where purchased during the Great Depression. Put yourself in the position of having ready cash to buy ground when no one else does. – A.T.

JWR Replies: I agree wholeheartedly with your observations. Please note that I specifically wrote about patience, buying at the bottom, and watching foreclosure listings. That is where folks will find those "50 cents on the dollar" bargain retreat properties.